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Home buyers paying €220 more a month than Eurozone average


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HOME buyers in this country are being forced to pay €220 a month more in mortgage repayments than the average in the Eurozone.

New figures show that home-loan lending rates fell here in March, but are till more than double what is being charged on average for new mortgages in the currency bloc.

Rates here are even higher for many existing mortgage holders.

The latest figures from the Central Bank show that average the interest rate on new mortgages was 2.80pc in March, down 11 basis points on the previous month.

But the average for the euro area was 1.31pc in March.

Ireland had the second highest mortgage interest rates across the euro area in March, after Greece.

Brokers Ireland said the huge gap between what is charged by Irish lenders and the average in the Eurozone meant someone taking out a new mortgage for €300,000 over 30 years was paying €224 more every month. Over the lifetime of the mortgage it would work out at €80,000 more than the average in the Eurozone, if rates did not change.

Daragh Cassidy of comparison site Bonkers.ie said people who took out a mortgage a few years back are likely to be paying far higher rates.

“At a time when household finances are under pressure like never before, news like this is likely to infuriate homeowners who’ll be wondering why we continue to get such poor value,” he said.

Both Mr Cassidy and Brokers Ireland encouraged those paying high rates to switch lenders to get better value.

Mr Cassidy said rates as low as 2.20pc are now on offer to certain o certain customers from Ulster Bank with a rate of 2.25pc on offer from KBC.

Ulster Bank will pay a contribution of €1,500 towards legal fees for switching while KBC will pay a €3,000 cash lump sum, he said.

Director of financial services at Brokers Ireland Rachel McGovern said that in the current climate consumers are fearful about their futures.

“We’re seeing many stopping their pension contributions for the moment,” she said.

Banks claim they have to charge more here as they are required by regulators to put more capital aside when issuing a mortgage than in the rest of the Eurozone.

They also argue that huge difficulties around repossessing properties when homeowners stop paying justify the rates premium.

But deputy Central Bank Governor Ed Sibley recently accused banks here of hitting many mortgage holders with double the interest rate they need to be profitable.

“Irish banks are determining that it’s profitable to lend at somewhere between 2.25pc and 3pc for new customers – but are continuing to charge 4.5pc for existing customers," he said.

Mr Sibley said he accepted the banks’ argument that operating costs here are higher than the EU average. But he said these don’t explain differing rates between new and older customers, which can add tens of thousands of euro to a typical home loan.

He noted that banks here were required to keep 2.5 times more funds deposited on reserve versus EU norms because Ireland was a relatively “risky” environment.

While this extra tie-up of capital did cut into their potential profits, he said this didn’t mean banks here couldn’t charge rates nearer typical EU levels.

Online Editors